Sky News: Tax To Tackle London Bubble

[FreeTrader]

House Prices: 'Tax To Tackle London Bubble'

Foreign investors may be hit with capital gains tax as part of efforts to prevent prices soaring beyond control, Sky News learns.

By Ed Conway, Economics Editor

George Osborne is considering slapping new taxes on foreign property investors in an effort to tackle what many see as a house price bubble in London and the South East of Britain.

The Chancellor is actively investigating imposing capital gains tax on foreign owners of British property at the Autumn Statement in December.

The Treasury has already provisionally costed the measures and is awaiting a final decision from Mr Osborne in the coming weeks.

While those living in Britain have to pay capital gains tax (CGT) of 18% or, more commonly, 28%, if they make a profit when reselling all but their main home, non-resident property owners are currently exempt for all their properties.

Britain’s comparatively generous regime is thought to be one of the factors behind the sharp increase in foreign ownership of properties in London.

House prices in London rose by nearly 9% in August, compared with around 2% elsewhere in the UK, according to the Office for National Statistics.

Fast-rising property prices have fuelled fears about a housing bubble in so-called “prime” London areas such as Kensington & Chelsea, where the average home is now worth almost 30 times the average local salary.

The price increases have been driven in part by foreign investment, with around 90% of the most expensive London newly-built properties being bought by non-UK citizens, according to estate agency Knight Frank.

It calculates that 65% of overseas buyers intend to rent their London properties rather than live in them.

At present, these buyers do not have to pay tax on the gains if they go on to sell the property in the future.

Under plans being mulled by Mr Osborne, even overseas buyers would become liable for CGT, as they are in many other countries throughout Europe.

According to the Treasury’s own internal research, the tax would be unlikely to raise significant sums – tens of millions rather than billions – but would address concerns that overseas investors might enjoy favourable treatment when it comes to property investment.

In last year’s Budget, the Chancellor introduced a series of measures levying annual charges on foreign investors who attempt to avoid paying taxes by holding properties through so-called “wrapper” companies.

The charges have brought in more revenue than expected, something the Chancellor is likely to outline at the Autumn Statement.

However, although imposing new capital gains taxes on overseas investors might address concerns about a destabilising influx of cash into the capital, some within Whitehall fear that they would undermine the Government’s message of keeping Britain "open for business."

Others are worried that they would cause a sharp fall in foreign demand for London property, which in turn could undermine the broader UK housing market ahead of the next election.

http://news.sky.com/story/1161992/house-prices-tax-to-tackle-london-bubble

A token gesture to appease the masses?

[The Knimbies who say No]

Extraordinary move considering pretty much anyone connected with policy has been quite explicit in denying a bubble.

[PopGun]

Extraordinary move considering pretty much anyone connected with policy has been quite explicit in denying a bubble.

Back door lie admission?!

Far too little far far too late.

[winkie]

Extraordinary move considering pretty much anyone connected with policy has been quite explicit in denying a bubble.

...not denying it because they were purposely blowing up.......now the horse has bolted because they left the gates wide open.

[19 year mortgage 8itch]

http://news.sky.com/story/1161992/house-prices-tax-to-tackle-london-bubble

A token gesture to appease the masses?

"Considering"

[FreeTrader]

"Considering"

Even so, if you're sitting on a huge gain on your London pad, do you consider selling up quickly to avoid any potential tax liability?

Or consider an 'arrangement' that resets the base cost?

[Bruce Banner]

http://news.sky.com/story/1161992/house-prices-tax-to-tackle-london-bubble

A token gesture to appease the masses?

Retrospective? Could this have been the plan all along?

Others are worried that they would cause a sharp fall in foreign demand for London property, which in turn could undermine the broader UK housing market bubble ahead of the next election.

[19 year mortgage 8itch]

Even so, if you're sitting on a huge gain on your London pad, do you consider selling up quickly to avoid any potential tax liability?

Or consider an 'arrangement' that resets the base cost?

Not naive enough to think this is for our benefit

And cynical enough to think that the people who matter are already a couple of steps ahead in the drip feed of info.

Since when has UK tax been anything other than optional? Surely these announcements are just boosts to the accounting and legal services industry? A people pay them money to avoid paying tax.

[tomandlu]

Retrospective? Could this have been the plan all along?

That was my thought... bait 'n' switch... they are a very tempting target (and, best of all, they don't vote!)

[TheCountOfNowhere]

Any excuse for a new TAX.

Make a new LAW stopping ALL foreign ownership.

The government is just lining their pockets and care not for the rest of the country as far as I can see.

[PopGun]

That was my thought... bait 'n' switch... they are a very tempting target (and, best of all, they don't vote!)

Fire sale trigger?!?

I'll believe it when I see it.

[sisyphal]

So only a few weeks after that blog article complaining how City Boys on 500K can no longer buy in their preferred areas of London, Osborne decides to act? That's some swift action.

That said, this is possibly the first time I've actually been in favour of them meddling with the housing market.

My (possibly wishful) thinking is that even if this isn't retrospective and only applies to new purchases cutting the new demand could dampen things and possibly even lead to a decline.

[The Masked Tulip]

This is just a sop to the masses people - it won't do anything to rebalance London house prices. Don't forget, Cable thinks that super tax on houses should START at TWO MILLION presumably meaning that he thinks any house up to 2 million is sensibly priced.

It probably will never happen and if it does it will be a wish wash of nothingness.

[koala_bear]

1. Foreign owners can't vote

2. Rich Tories obviously being priced out!

3. They expect to rake in a reasonable amount in tax (unless it is all owned by holding companies in sunnier crown dependencies)

[TheCountOfNowhere]

This is just a sop to the masses people - it won't do anything to rebalance London house prices. Don't forget, Cable thinks that super tax on houses should START at TWO MILLION presumably meaning that he thinks any house up to 2 million is sensibly priced.

It probably will never happen and if it does it will be a wish wash of nothingness.

I have an idea. ->STOP PRINTING MONEY AND RAISE INTEREST RATES !!!!

[ticket2ride]

An ex neighbour of ours who has moved back to Australia, owns at least 2 London properties, bought around 2004. A tax could potentially make his paper profit shrink considerably.

I could see how it would hurt this type of investor worse than the money laundering type.

[koala_bear]

An ex neighbour of ours who has moved back to Australia, owns at least 2 London properties, bought around 2004. A tax could potentially make his paper profit shrink considerably.

I could see how it would hurt this type of investor worse than the money laundering type.

I suspect it would also be linked to the undeclared BTL income clamp down.

HMT rarely make quick decisions or deliberations they will have been planning manoeuvres for years to make sure they can squeeze the tax out. i.e. they had to have the holding company changes in place before they could do this.

[winkie]

I suspect it would also be linked to the undeclared BTL income clamp down.

HMT rarely make quick decisions or deliberations they will have been planning manoeuvres for years to make sure they can squeeze the tax out. i.e. they had to have the holding company changes in place before they could do this.

[SickofRenting]

The best way to tackle this is to slap a 100% capital gains tax for foreigners when they sell property, to ensure that the cost they bought the property at is also the cost of when they sell it (calculate the selling fees as a taxable loss). Same goes to foreign BTL investors, slap 100% tax on rental profits.

It wouldn't worry me one bit if other countries started to do this too.

But they won't. Putting on a meagre tax now is far far far too late.

[TheCountOfNowhere]

The best way to tackle this is to slap a 100% capital gains tax for foreigners when they sell property, to ensure that the cost they bought the property at is also the cost of when they sell it (calculate the selling fees as a taxable loss). Same goes to foreign BTL investors, slap 100% tax on rental profits.

It wouldn't worry me one bit if other countries started to do this too.

But they won't. Putting on a meagre tax now is far far far too late.

You seem to be under the inmpression they want to stop the bubble.

WATCH WHAT THEY DO, NOT WHAT THEY SAY,

this is a government banker bail out bubble fuelled by low sales volumes, the FLS and HTB1,

i.e. It's a crack up boom.

Only a loony would buy into this stupidity.

The last time it was fuelled by the crazy bank lending that collapsed the banking system...now the only thing keeping it going is the government.........

Edited October 31, 2013 by TheCountOfNowhere

[slacker]

I still believe that Osborne/Cameron have the best intentions. The policies they are enacting are just playing the cards they have been dealt - and given same situation I'd probably do the same. They have kept a lid on loony right policies so far and I don't think that is just because of the coalition situation. Cameron has massively exceeded my expectations as a PM.

They are walking a difficult path of getting re-elected, reviving growth and not being the ones to trigger a collapse - whilst carrying the baggage of Tory stereotypes from Thatcher years. The bank bailouts and QE haven't helped the toff issue, but it was unrealistic for a new coalition to solve the issue in any other way.

None of it does me any favours and I'm far worse off since the election, but the crony capitalism type comments are mostly unfair.

As all the current GDP heat moves to property speculation - they'll have no choice but to raise more tax from it - as tax from other areas will drop.

But it's what they do next for middle-earners that will define next election, starting to expect something a bit radical there - not just on taxation, but overseas investment in local manufacturing - don't think we've seen all the take-aways from the China visit yet.

[wherebee]

You seem to be under the inmpression they want to stop the bubble.

WATCH WHAT THEY DO, NOT WHAT THEY SAY,

Yup. This is also unenforceable with current police and court systems coupled with the human rights act and anti-racism laws. trust me on this one.

Only enforceable in countries that face reality, such as china and HK where they will actively target non-chinese to see if they are up to no good.

[Austin Allegro]

Is it possible that the London market has peaked, and that this is a. a sop to the masses now that there's no real danger in putting off new investors, and b. a way of locking in existing property owners to discourage them from selling?

I say this because (excuse the 'man in the pub told me' anecdote) but I was talking to some financial wallah of some sort last night (no idea what he does) but he said that investment was beginning to trickle away from London and move to southern and eastern Europe.

[@contradevian]

Is it possible that the London market has peaked, and that this is a. a sop to the masses now that there's no real danger in putting off new investors, and b. a way of locking in existing property owners to discourage them from selling?

I say this because (excuse the 'man in the pub told me' anecdote) but I was talking to some financial wallah of some sort last night (no idea what he does) but he said that investment was beginning to trickle away from London and move to southern and eastern Europe.

Was hearing this too. London has become a victim to its own bullsh1t err success

[righttoleech]

I have an idea. ->STOP PRINTING MONEY AND RAISE INTEREST RATES !!!!

I guess it will happen eventually........probably after those who could have gone into BTL but resisted for reasons of morality have been financially destroyed.